The GCC plays a leading role in the AI revolution

Primed for transformation

Although various forms of AI have been around for decades, the emergence of Generative AI (GenAI) in the last few years has been transformative for the region’s business landscape. C-suite leaders have been eager to leverage this opportunity to gain a substantial competitive advantage.

The GCC region is particularly well-positioned to capitalise on the AI revolution due to several key advantages:

Abundant investment capital:

The region has significant capital for investment, particularly through its sovereign wealth funds, family offices and venture funds. It has a track record of investing in technology at home and abroad.

World-class ICT infrastructure:

Even before AI became a priority, the GCC states already had some of the best ICT infrastructure in the world, including the fastest internet connections and extensive data centre capacity. This supports domestic demand and leverages the region’s geographical location as a hub for fibre-optic cables connecting Europe, Asia and Africa.

A keenness to embrace new technologies:

By leveraging AI, businesses in the Middle East have been able to automate time-consuming and labour-intensive tasks. In our 27th Annual CEO survey, 73% of CEOs in the Middle East are keen to embrace new technologies.⁹ Business leaders recognise that technologies, such as GenAI will change the way businesses create, deliver, and capture value over the next three years. Nearly half of CEOs surveyed indicated they have already changed their tech strategy to leverage opportunities that are enabled by GenAI.

Strong international relationships:

GCC states have strong links with countries and companies that are central to the AI revolution, such as Microsoft, Oracle and Amazon. To position itself as a top destination for tech investment, the UAE has offered incentives and access to its rapidly advancing AI-powered infrastructure.

Proactive government initiatives:

Governments in the region recognised the potential of AI early on. The UAE launched a national AI strategy in 2017 and appointed the world’s first minister for AI. Following this, other Gulf states introduced their own AI strategies and invested in educational institutions, such as the Qatar Centre for Artificial Intelligence.

These five advantages have positioned the GCC ahead of the curve since the AI boom got underway. As a result, businesses in the region have been leaders in integrating AI into their products and daily processes. Abundant access to capital, computing power, and data have led experts to believe that the UAE could emerge as the third-most-important country for AI, following the United States and China.¹⁰

The GCC partners with US AI firms

GCC companies entered the AI era with already established relationships with major US tech companies, such as Google, Microsoft and Amazon, which had mainly been focused on delivering cloud computing data centres. This has provided a basis for cooperation in AI, most notably the announcement in April 2024 that Microsoft would invest US$1.5bn in Abu Dhabi’s G42. This follows a US$800m investment in G42 by US private equity firm Silver Lake in 2021.¹¹

The US is also interested in capital investment in the sector. OpenAI’s CEO, Sam Altman, has argued that trillions of dollars of investment is needed to reshape the global semiconductor industry to provide the capacity required to deploy AI, which was discussed in his recent visit to the UAE where OpenAI has partnered with G42.^12,13

Several GCC sovereign wealth funds have already invested in US AI firms. In 2021, one of the first investments made by the newly launched Abu Dhabi Growth Fund was in chipmaker Cerebras, as a lead investor in a US$250m funding round,¹⁴ and then this year Mubadala bought a 3% stake in Anthropic, a leading GenAI firm founded by OpenAI alum, for US$500m this year.¹⁵ The most substantial announcement came in March, when it was announced that Mubadala and G42 would team up to launch a new AI investment vehicle, MGX, which has envisaged doing over US$100bn in deals in the coming years, potentially including chip manufacturing in the UAE.¹⁶

There are also partnerships between US firms and other regional players. In June, Qatar’s Ooredoo announced a partnership with NVIDIA to roll out its AI technology across its data centres in Qatar, Kuwait and Oman. Alat, Saudi Arabia’s advanced manufacturing champion, has a focus on sectors including AI infrastructure and semiconductors and has indicated an interest in partnering with US companies.

The energy dynamic

As the region positions itself as a major player in the global AI industry, the rapid expansion of AI technologies is driving significant energy demand, particularly in data centres. The International Energy Agency (IEA) forecasts that global data centre electricity demand will more than double from 2022 to 2026.¹⁷

In the Middle East, where AI and digital transformation are rapidly advancing, this energy dynamic presents challenges that require proactive solutions. By leveraging renewable energy and implementing energy-efficient technologies, the Middle East has the potential to meet AI’s growing energy demands while minimising its environmental impact.

Economic impact

Assessing the likely economic impact of AI in the future is difficult, despite numerous bold projections. However, there is good reason to believe that AI’s impact could surpass previous technological developments.

In the region, there are significant opportunities for AI integration to enhance business performance. In the UAE, for example, ADNOC has estimated that its use of AI tools improved its efficiency in ways that saved US$500m in 2023 and reduced its carbon emissions.¹⁸ Other companies that have reported gains from AI deployment include Emirates NBD - one of the first firms in the region to use an AI chatbot (“Eva”) for customer service calls, launched back in 2017. Meanwhile, Kuwait Oil Company has developed AI tools with IBM to enhance its reservoir management, reducing operational downtime.

On a smaller scale, payments firm Magnati is using AI analysis of merchant transactions to improve analysis of the creditworthiness of SMEs, which may improve their access to credit - is an area that has long been recognised as a weakness for the GCC banking sector and economic development.¹⁹

As well as deploying foreign-made AI, there have been several GenAI tools developed within the GCC, using Arabic large language models such as Jais in the UAE (developed by G42 and academic partners) and Bayan by the Saudi Data and AI Authority. The Technology Innovation Institute, a leading global scientific research centre and the applied research pillar of Abu Dhabi’s Advanced Technology Research Centre, has also launched a second iteration of its renowned large language model Falcon 2. Tested against several prominent AI models in its class, Falcon 2 surpasses the performance of Meta’s Llama 3 with eight billion parameters.²⁰

Looking ahead, the GCC will continue to play a leading role in the global AI landscape, driven by concerted investments and strategic initiatives. For example, the national visions of regional governments are driving the region’s efforts towards AI research, attracting global investment, while governments are also fostering an environment where startups and tech companies can thrive.

Sovereign wealth funds are also likely to contribute substantial capital to invest in building AI infrastructure, including chip manufacturing and data centres, some of which could be hosted in the region. However, as data continues to drive innovation, efficiency, and competitiveness, organisations must be mindful of scalability constraints, a shortage of skilled professionals, and concerns around energy sustainability.

References

_{9) PwC Middle East, 27th CEO survey Middle East findings, 2024

10) The Economist, 23 November 2023” Lessons from the ascent of the United Arab Emirates”

11) G42.ai, 14 April 2024 G42 announces investment by Silver Lake

12) " Wall Street Journal, 8 February 2024 Sam Altman seeks trillions of dollars to reshape business of chips and ai

13) G42.ai, 18 October 2023 G42 and OpenAI launch partnership deploy advanced ai capabilities optimized UAE and broader region

14) Arabian Gulf Business Insight, 21 June 2024 Abu Dhabi backed chipmaker Cerebras plans IPO/

15) CNBC, 25 March 2024 FTX estate sells majority stake in startup Anthropic for $884 million

16) www.ai-cio.com, 13 March 2024 Abu Dhabi launches artificial intelligence tech investment vehicle MGX.

17) time.com, ai data centers energy usage climate change

18) ADNOC.ae news and media 5 March 2024 ‘$500 million in value generated by ADNOC through deployment of ai solutions in 2023’

19) Financial Times “Fintech in AU deal with Brookfield backed Abu Dhabi payments group

20) Technology Innovation Institute, Tii.ae, Falcon models}